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Satheesh Vellinezhi
| Photo Credit: Satheesh Vellinezhi

Too many letters. Oh, and I’m not talking about the Russian alphabet, although it also has way too many letters. I’m talking about modern correspondence in this digital age. (The writer apologises for the loose use of the word letters. Sadly, this writer is forever apologising). In fact, this is with reference to emails, text messages, phone calls, and even the odd fax, (those under the age of 43, please Google fax. This writer is allowed only a certain number of words per column, by the editorial team).

All these messages ask only two things. The first is if I’m responsible for the Kala Ghoda Arts Festival? And depending on my mood, I normally answer “Sometimes”. The second question is more devastating. It goes on these lines, “Hello, uncle, since you are so old, can you decode the 2025 budget for us?”

Frankly, I’d much rather answer the question about Kala Ghoda Arts Festival. However, since millions are asking, and many of them being foreigners, I thought it only fair that I take a stab at it. After all economics was my ancillary subject in junior college. That I dropped it and opted for physical education is a separate matter.

First up, I would like to present terms that you should avoid trying to understand. Terms like the Nifty 50. Also, all other members of the Nifty family, such as Nifty Realty, Nifty Media, Nifty Auto, Nifty Uncle, Nifty Aunty… I think you get the picture.

These terms are just kept there so television survives.

Let me explain. Television news is the budget makers’ very own NGO. The budget makers help television with content, that they desperately need. The Nifty family plays a very important role. News panels can exhaust hours discussing these terms, without making any headway, and yet keeping the viewer entertained, by the dearth of any conclusive conversations on the subject.

It’s a bit like discussing Hindi film lyrics from the 90s. I mean who can decode the song ‘Ilu Ilu… Ilu Ilu…’? Another term to absolutely avoid is Sensex. Once you start getting involved with this Sensex, you run the risk of falling deep into a rabbit hole of unanswered questions. Then there are terms like short-term volatility, sectoral indices, debt markets, fiscal deficit and increased capex. Even while writing these terms, I feel sleepy. Suffice to say, (look the writer is no Nani Palkhivala, but he needs to, for the purpose of this column, at least sound like a leading global economist), the only thing that should really concern you, oh citizen, is the bit on income tax.

Since, upto ₹12 lakh per annum is tax free, it’s clear that your motivation should be to earn exactly that and nothing more. Once you earn ₹13 lakh, you automatically pay 15% tax. So, you’ve actually earned only ₹13 lakh – ₹1,95,000. This equals to ₹11,05,000. So, by earning more, you’ll be earning to exactly ₹12 lakh. I hope this settles all arguments. Now, let’s not mention any of this till the ‘26-27’ budget please. 

The writer has dedicated his life to communism. Though only on weekends.

The Centre’s fiscal deficit at the end of the first seven months of financial year 2024-25 touched 46.5% of the full-year target, government data showed on Friday (November 29, 2024).

In absolute terms, the fiscal deficit — the gap between Government’s expenditure and revenue — was at ₹7,50,824 crore during April-October period, according to data released by the Controller General of Accounts (CGA).

The deficit stood at 45% of the Budget Estimates (BE) in the corresponding period of 2023-24.

In the Union Budget, the government projected to bring down the fiscal deficit to 4.9% of gross domestic product (GDP) in the current 2024-25 financial year. The deficit was 5.6% of the GDP in 2023-24.

In absolute terms, the Government aims to contain the fiscal deficit at ₹16,13,312 crore during the current fiscal.

The revenue-expenditure data of the Union Government for the first seven months of 2024-25 showed that the net tax revenue was about ₹13 lakh crore or 50.5 per cent of budget estimate for the current fiscal.

The net tax revenue collection was 55.9% at September-end of 2023.

The central Government’s total expenditure in the seven months through October stood at ₹24.7 lakh crore or 51.3% of budget estimate. Expenditure was 53.2% of budget estimate in the year-ago period.

Of the total expenditure, ₹20 lakh crore was in the revenue account and ₹4.66 lakh crore in the capital account.

Fiscal deficit is the difference between the total expenditure and revenue of the Government. It is an indication of the total borrowing that is needed by the Government.

Image used for representative purpose only
| Photo Credit: istock.com/Getty Images

The Centre’s fiscal deficit at the end of the first five months of the current fiscal touched 27% of the full-year target, government data showed on Monday (September 30, 2024).

In absolute terms, the fiscal deficit – the gap between expenditure and revenue – was at ₹4,35,176 crore as of August-end, according to data released by the Controller General of Accounts (CGA).

The deficit stood at 36% of the Budget Estimates (BE) in the corresponding period of 2023-24.

In the Union Budget, the government projected to bring down the fiscal deficit to 4.9% of the gross domestic product (GDP) in the current 2024-25 financial year. The deficit was 5.6% of the GDP in 2023-24.

In absolute terms, the government aims to contain the fiscal deficit at ₹16,13,312 crore during the current fiscal.

Unveiling the revenue-expenditure data of the Union government for the first five months of 2024-25, CGA said the net tax revenue was ₹8.7 lakh crore or 33.8% of the BE for the current fiscal.

The net tax revenue collection was 34.5% at July-end 2023.

The central government’s total expenditure in the four months through August stood at ₹16.5 lakh crore or 34.3% of BE. The expenditure was 37.1% of the BE in the year-ago period.

Of the total expenditure, ₹13,51,367 crore was in the revenue account and ₹3,00,987 crore was in the capital account.

Out of the total revenue expenditure, ₹4,00,160 crore was towards interest payments.

Fiscal deficit is the difference between the total expenditure and revenue of the government. It is an indication of the total borrowing that is needed by the government.

India’s Finance Minister Nirmala Sitharaman holds up a folder with the Government of India’s logo as she leaves her office to present the federal budget in the parliament, before the nation’s general election, in New Delhi, India, February 1, 2024.
| Photo Credit: REUTERS

The government under Prime Minister Narendra Modi should focus on adherence to fiscal prudence and continue on the fiscal consolidation path, suggested SBI Research ahead of the much-awaited full Budget for 2024-25 to be tabled on July 23 – the first Budget under Modi 3.0.

What is fiscal deficit?

The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings that may be needed by the government.

SBI Research suggested that the Centre should target a fiscal deficit of 4.9%, but it must not obsess too much over the fiscal stance. The Government intends to bring the fiscal deficit below 4.5% of GDP by the financial year 2025-26.

In the Interim Budget earlier this year, the Government has targeted a fiscal deficit of 5.1% of GDP for 2024-25. However, SBI Research believes that the Government may budget a fiscal deficit of less than “5% — may be 4.9% — for 2024-25” due to stellar growth in GST revenues and higher dividends from PSUs and RBI.

State borrowings

As the budgeted fiscal deficit gets lowered, the gross market borrowing of the government will also reduce to around ₹13.5 lakh crore in FY25 compared to ₹14.1 lakh crore in the interim budget and net market borrowing to ₹11.1 lakh crore against ₹11.8 lakh crore earlier, the report, authored and led by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said. “This along with India’s inclusion in Global Bond indices will keep the yield curve movements anchored,” it added.

In 2023-24, the Government pegged the fiscal deficit target for FY2023-24 at 5.9% of gross domestic product (GDP). Later, it was downwardly revised to 5.8%.

The interim budget, tabled on February 1, took care of the financial needs of the intervening period until a government was formed after the Lok Sabha polls, after which a full budget was supposed to be presented by the new government in July.

FM Sitharaman to break record with sixth budget presentation

With this upcoming Budget Presentation,surpassed the record set by former Prime Minister Morarji Desai, who as finance minister, presented five annual budgets and one interim budget between 1959 and 1964.

Mrs. Sitharaman’s upcoming Budget speech would be her sixth.The government on July 6 announced the dates of the Budget session of Parliament which will start on July 22 and conclude on August 12.

The Central government’s fiscal deficit during 2023-24 at 5.6% of the GDP was better than previous estimates of 5.8% on account of higher revenue realisation and lower expenditure, according to official data released on Friday.

In actual terms, the fiscal deficit — or gap between expenditure and revenue — was ₹16.53 lakh crore, or 5.63% of the GDP, which grew 8.2% in 2023-24.

In the revised estimate for 2023-24, the government had in the interim Budget presented in Parliament on February 1 projected the fiscal deficit of ₹17.34 lakh crore, or 5.8% of the gross domestic product (GDP).

According to the data released by the Controller General of India (CGA), the government’s revenue collection was 101.2% of the revised estimates (RE) presented in the Budget.

Net tax collection was ₹23.26 lakh crore in the financial year ending March 2024.

The expenditure worked out to be ₹44.42 lakh crore. The expenditure during the last fiscal was 98.9% of the RE.

CGA data also showed that revenue deficit during FY24 was 2.6% of the GDP and effective revenue deficit was 1.6% of the GDP.

Commenting on the data, ICRA Chief Economist Aditi Nayar said the government’s fiscal deficit was contained below the RE for FY24, benefiting from higher-than-anticipated receipts and lower than estimated revenue spending, with only a marginal miss in capital expenditure.

Vivek Jalan, Partner at Tax Connect Advisory Services LLP, a multi-disciplinary consulting firm, said lower fiscal deficit is majorly due to the uptick in tax revenues.

“The encouraging fiscal deficit numbers can be dedicated to the taxpayers of the country. The efficiency of the CBDT and CBIC and especially the ground covered in implementation of Artificial intelligence in unearthing fake transactions have also to be appreciated by honest taxpayers,” he said.

For the current financial year (2024-25), the government estimates the fiscal deficit at 5.1% of the GDP, or ₹16,85,494 crore.

As per the Fiscal Responsibility & Budget Management (FRBM) Act, the government plans to achieve a fiscal deficit of 4.5% in 2025-26.

During 2023-24, the government received ₹27,88,872 crore (101.2% of corresponding RE of total receipts) comprising ₹23,26,524 crore tax revenue (net to Centre), ₹4,01,888 crore of non-tax revenue and ₹60,460 crore of non-debt capital receipts.

According to CGA data, ₹11,29,494 crore was transferred to State governments as devolution of share of taxes by the Government of India, an increase of ₹1,81,088 crore year-on-year.

Total expenditure incurred by the central government was ₹44,42,542 crore (98.9% of corresponding RE of 2023-24), of which ₹34,94,036 crore was on revenue account and ₹9,48,506 crore on capital account.

Of the total revenue expenditure, ₹10,63,871 crore was towards interest payments and ₹4,13,542 crore on account of major subsidies.

Meanwhile, according to another CGA data, the fiscal deficit in April was 12.5% of the Budget Estimate (BE) for 2024-25, or ₹2.1 lakh crore. It was 7.5% of BE 2023-24 in April 2023.

Ms. Nayar said while the fiscal deficit for April 2024 has spiked on account of an unexpected surge in revenue spending, in spite of healthy tax revenues, the higher-than-budgeted dividend from the Reserve Bank of India (RBI) is likely to dampen the fiscal deficit in the rest of this quarter.

Overall, the fiscal dynamics appear favourable for FY25, amid continued resilience in GST collections and an unexpectedly large dividend payout by the RBI, she added.

Photo used for representation purpose only.

The Centre’s capital expenditure slipped by a sharp 40.5% in January at ₹47,600 crore compared with ₹80,000 crore a year ago, while the fiscal deficit hit 64% of the revised estimates for 2023-24 by the end of January.

With just two months to go in the financial year, the government is likely to miss its capex target and is also behind on its revenue expenditure plans, but it appears comfortably on track to meet the revised deficit goal of 5.8% of GDP, economists reckoned.

“With ₹2.3 lakh crore left to be incurred in February and March to meet the full year target for capex, we expect the capex to undershoot by at least ₹50,000 crore,” said ICRA chief economist Aditi Nayar. Gross tax revenues need to rise just 6% over these two months to hit the 2023-24 goal and corporate taxes are likely to surpass last year’s collections, she reckoned.

Bank of Baroda chief economist Madan Sabnavis noted that only around 75% of the total planned expenditure for the year has been incurred in the first ten months, so the scope for higher expenditure in the last two months is very high. “This also gets reflected in the high cash balances of the government observed this month,” he said.

Interestingly, less than 70% of planned expenditure has been achieved in the ministries of Agriculture and Consumer Affairs, which deal with outlays on the PM Kisan scheme and food subsidies, he said, and the rural development ministry has similar spending levels as well. The overall fiscal deficit stood at ₹11 lakh crore by January, lower than the ₹11.9 lakh crore over the same period 2022-23.

Illustration: Soumyadip Sinha

Finance Minister Nirmala Sitharaman, presenting her sixth Union Budget and her first Interim Budget, resisted the temptation to hand out dramatic pre-poll sops like the ones unveiled ahead of the 2019 Lok Sabha election, opting instead to bank on the government’s track record and the promise of “unprecedented development” in the next five years.

While broadly sticking to her assurance that this 2024-25 Budget would be a ‘vote on account’, without “spectacular announcements”, Ms. Sitharaman painted an elaborate picture of India’s imperfect past prior to 2014, with the economy and governance needing serious mending. She then outlined how the NDA government, with a ‘nation-first’ approach, had enabled the transition to a virtually perfect present.

Painting a rosy picture

“It is now appropriate to look at where we were then till 2014 and where we are now, only for the purpose of drawing lessons from the mismanagement of those years,” Ms. Sitharaman said, promising a white paper in the House on the mess allegedly inherited by the Narendra Modi-led government and the economy’s subsequent resurgence to a path of sustainable, high growth.

Analysis | Nirmala Sitharaman’s interim Budget reveals BJP’s confidence in comeback

“People are living better and earning better, with even greater aspirations for the future. Average real income of the people has increased by 50%. Inflation is moderate,” she underlined.

New housing scheme

Though there were no tax breaks, some immediate promises were made, including a scheme to enable the “deserving” urban middle class to buy or build their own homes, two crore more rural houses to be built in the next five years, and 300 units of free power a month for one crore households through rooftop solar solutions, as mooted by Prime Minister Narendra Modi after the Ram Mandir’s consecration last month.

Finance Secretary T.V. Somanathan said the contours for the new housing scheme — which does not directly refer to urban households, but hints at them by picking beneficiaries from chawls, slums or unauthorised colonies — will be finalised before funding the plan.

Apart from a few such feel-good promises, the Finance Minister committed to work with States and stakeholders to implement “next generation reforms” in its next tenure. At the full Budget in July, the government plans to present a detailed roadmap for its vision of a developed India by 2047, she said, enunciating some guiding principles that will drive its approach.

Poll signals

Ms. Sitharaman also made it a point to emphasise that the government is committed to turning the eastern parts of India — Bihar, Jharkhand, West Bengal, Odisha, and Chhatisgarh — into the growth engines of the economy in the coming Amrit Kaal, a term used for the period leading up to 2047. Another plausible poll signal was the constitution of a high-powered panel to consider the challenges arising from “fast population growth and demographic changes”, although she parried queries on the intent of this move in her post-Budget press conference.

Terming ‘social justice’ an effective and necessary governance paradigm, the Minister argued that what was mostly a political slogan in the past has been achieved by this government, through a “saturation approach of covering all eligible people” to address systemic inequalities in society. “This is secularism in action, reduces corruption, and prevents nepotism,” she asserted, adding that the four major castes identified by the PM – the poor, women, youth and farmers — would receive primacy in policy.

There were no philosophers or poets quoted in her speech, which was about 25% shorter than the President’s Wednesday address that had also embellished the government’s achievements. Instead, Ms. Sitharaman invoked the PM’s speeches and beliefs about half a dozen times before she wrapped up.

Stringent fiscal discipline

While some hopes — for measures to spur consumption and rural demand against the backdrop of a poor monsoon, and to prod private investments — were dashed, Ms. Sitharaman’s fiscal discipline surprised most economists, who had expected this year’s fiscal deficit target (5.9% of GDP) to be breached. The FM not only revised the deficit estimate for this year to 5.8% of GDP, but also committed to hit the 5.1% mark in 2024-25, with a firm eye on bringing the fiscal gap to or below 4.5% of GDP in 2025-26.

Capital expenditure plans for the coming year got a modest but assured 11.1% increase, rising to an ostensbily auspicious number of ₹11,11,111 crore, and interest-free capex loans to States were raised to ₹1.3 lakh crore. Yet, gross and net borrowings planned in 2024-25 have been lowered from this year’s levels to ₹14.13 lakh crore and ₹11.75 lakh crore, respectively.

Interim Budget 2024 | Govt to come out with White Paper on mismanagement of economy prior to 2014, says Sitharaman

“Now that the private investments are happening at scale, the lower borrowings by the Central government will facilitate larger availability of credit for the private sector,” Ms. Sitharaman hoped, marking a prudent return to the tradition of keeping Interim Budgets low on profligacy and high on intent.

New Delhi:

The central government’s fiscal deficit touched 39.3 per cent of the full-year target in the first half of the current financial year, slightly higher than 37.3 per cent recorded in the year-ago period.

In actual terms, the fiscal deficit, or the gap between expenditure and revenue, worked out at Rs 7.02 lakh crore at the end of September, as per data released by the Controller General of Accounts (CGA).

In the Union Budget, the government projected to bring down the fiscal deficit to 5.9 per cent of the Gross Domestic Product (GDP) in the 2023-24 financial year.

The fiscal deficit was 6.4 per cent of the GDP in 2022-23, against the earlier estimate of 6.71 per cent.

The tax revenue was at Rs 11.60 lakh crore or 49.8 per cent of the annual target. During April-September 2022-23, the net tax collection was 52.3 per cent of that year’s annual Budget Estimate (BE).

The Centre’s total expenditure was Rs 21.19 lakh crore, or 47.1 per cent of BE for 2023-24, marginally higher than 46.2 per cent of BE for 2022-23.

The Government of India has transferred Rs 4,55,444 crore to state governments as devolution of share of taxes till September, which is Rs 79,338 crore higher than the previous year.

Of the total revenue expenditure, Rs 4.84 lakh crore was on account of interest payments and Rs 2.06 lakh crore towards major subsidies.

Commenting on the CGA data, ICRA Chief Economist Aditi Nayar said higher than budgeted dividend surplus transfer of Rs 8,742 crore from the RBI is likely to provide some cushion to meet any undershooting in other revenue streams, including disinvestment or potential overshooting in expenses, relative to respective BE, such as MGNREGA and LPG subsidy.

Central government’s fiscal deficit touched 39.3% of the full year target in the first half of the current financial year, slightly higher than 37.3% recorded in the year-ago period.

In actual terms, the fiscal deficit or the gap between expenditure and revenue worked out at ₹7.02 lakh crore at the end of September 2023, showed data released by the Controller General of Accounts (CGA).

In the Union Budget, the government projected to bring down the fiscal deficit to 5.9% of the gross domestic product (GDP) in the current 2023-24 financial year.

The fiscal deficit was 6.4% of the GDP in 2022-23 against the earlier estimate of 6.71%.

The tax revenue was at ₹11.60 lakh crore or 49.8% of the annual target. During April-September 2022-23, the net tax collection was 52.3% of that year’s annual Budget Estimate (BE).

Centre’s total expenditure was ₹21.19 lakh crore or 47.1% of BE of 2023-24, marginally higher than 46.2% of BE 2022-23.